Low-income communities face numerous challenges when it comes to accessing the resources needed to grow and thrive, especially equitable access to capital. Community Development Financial Institutions (CDFIs) are private, nonprofit, community-based investors that leverage private sector investm\ents to provide financing and technical assistance for a range of activities, including job creation, small business growth, housing and other local development initiatives.

The Kresge Foundation has long supported CDFIs to invest in climate finance innovation, small business development for minority entrepreneurs and, recently, for community development at Historically Black Colleges and Universities (HBCUs).

At the recent Opportunity Finance Network (OFN) conference, 2,000 practitioners, funders, investors, policymakers and other industry stakeholders that work with CDFIs came together to discuss pressing issues in community finance, including a chronically overlooked topic: HBCUs as community development anchors.

HBCUs: Anchor Institutions in Community Revitalization

The first discussion Kresge hosted was a high-level exploration of the contributions HBCUs make to local economies and society, despite their limited financial resources and direct underinvestment by government.

The fireside chat, moderated Kresge Social Investment Officer Erika Brice, featured of Dillard University, an HBCU in New Orleans. Brice underscored how though these institutions represent only 3% of the nation’s colleges and universities, they collectively generate $16.5 billion annually, contributing $1.44 for every dollar spent locally. She highlighted their higher enrollment and graduation rates, lower tuition costs, and key role in producing Black professionals across sectors like medicine, law and engineering.

“HBCUs continue to encounter funding challenges despite their disproportionate impact on both students and local economies,” said Brice. “We think it’s vital to explore how CDFIs are uniquely positioned to help these important institutions grow.”

Ashley Johnson, program officer for Kresge’s Education Program, elaborated on the foundation’s historic support for HBCUs, which has evolved from capital improvements to a more strategic focus on long-term investments in financial health and sustainability. Johnson emphasized that addressing systemic issues, such as solvency and equitable access to capital, is vital for ensuring the future success of these institutions.

Perry, a senior fellow at Brookings, discussed the underappreciated value of HBCUs and their broader role in community development. “HBCUs are lifelines in Black communities, yet they’ve long been devalued,” Perry said. He explained that the devaluation of Black assets, including institutions like HBCUs, is tied to systemic racism and historical inequities.

“HBCUs, compared to their predominantly white counterparts, receive far less state appropriation and federal support,” Perry said. “The 10 largest HBCU endowments in 2020 totaled just $2 billion, compared to $200 billion across the top 10 predominantly white institutions.

“I always remind people that HBCUs are treated like black people, that the lack of wealth is reflected in a lack of endowments. And so, understand that as people are devalued, so are these institutions we populate.”

Perry stressed the importance of shifting the narrative to recognize HBCUs as essential community anchors and engines of local economic growth. He called for innovative financial products tailored to the realities of HBCUs, particularly in areas like land acquisition and development.

“HBCUs are not just educational institutions,” Perry said. “They are key drivers of local economies, and investment in these schools is essential not just for students but for the communities they anchor.”

German, director of the Public Finance Initiative, highlighted the unique financial challenges HBCUs face.

“HBCUs can’t fund vital projects through tuition alone,” German said. She pointed to deferred maintenance and aging infrastructure as issues that typically go unfunded due to a lack of external investment. German pointed out the need for CDFIs to step in and provide capital for projects that traditional lenders would otherwise ignore.

Patrick, Dillard’s treasurer, shared his experience navigating these challenges firsthand. He discussed Dillard’s goals of creating affordable housing, improving campus infrastructure, and expanding its community footprint. While securing resources for these ambitions has been challenging, Patrick pointed to specific projects, such as a $20 million grant from the Environmental Protection Agency (EPA) for new housing, as steps forward.

Patrick also mentioned Dillard’s interest in pursuing solar microgrids and low-cost energy solutions for the surrounding community, emphasizing that such initiatives require partnerships and innovative funding mechanisms.

“We want to do more for our students, staff, and the local community, but we need more resources,” Patrick said.

A Call to Action for CDFIs

An extended panel moderated by Perry then examined how CDFIs can play a key role in supporting HBCUs’ long-term financial health and community impact.

Perry’s 2022 paper, A Call to Action for HBCU Investment, set the tone for the discussion, which examined collective action between HBCUs, CDFIs and other stakeholders to address the systemic challenges and historical underinvestment these institutions face.

Perry outlined the various revenue sources for colleges and universities, including tuition, state and federal appropriations, endowments, and government grants. Perry stressed that it’s essential for HBCUs to diversify revenue streams and move beyond reliance on tuition and fees.

“HBCUs must look for ways to acquire and develop assets in undervalued communities,” Perry said. “There’s a tremendous opportunity for HBCUs to participate in land trusts, property acquisition and community development projects that not only provide revenue but also revitalize their surrounding neighborhoods.”

Bill Bynum, CEO of Hope Credit Union, a Kresge partner, emphasized the strong alignment between the missions of HBCUs and CDFIs, both of which serve under-resourced communities.

“CDFIs are uniquely positioned to provide the flexible, mission-driven capital that HBCUs need to thrive,” Bynum noted. “If we’re going to fulfill what we believe our mission is as a community development financial institution, we’ve got to go where the fire is and put it out. And unfortunately, if you look at where you see CDFIs located, it’s in distressed communities, surrounded by black folks who rely on those agencies, not just for jobs and for education, but as economic drivers.”

He also shared examples of CDFIs offering financing for deferred maintenance, infrastructure upgrades, and other critical projects that traditional lenders typically overlook.

Damien Wilson, senior director of the HBCU Brilliance Initiative at the Reinvestment Fund, also a Kresge partner, highlighted the untapped potential of HBCUs’ land and property assets.

“Many HBCUs have large tracts of land or community facilities that could be leveraged for broader community development projects,” Wilson said.

“The potential for HBCUs to drive local economic growth is enormous, but unlocking that potential requires strategic capital partnerships.”

Wilson also emphasized the importance of raising awareness about the role of CDFIs in HBCU development. “It’s about exposure,” he said. “We need to engage community leaders, activists and local governments in the conversation, ensuring they understand that CDFIs are not just capital providers but long-term partners in building resilient communities.”

Patrick echoed the call for partnerships, adding that Dillard, like many HBCUs, is working under significant financial constraints.

“We’ve always had to do more with less,” Patrick said. “I think we do have a competitive advantage in many ways because we’re operating under distress. The resilience is incredible. And so, I really do feel, HBCUs are a wise investment.”

The way forward: investment and collective action

Both discussions stressed the urgent need for investment in HBCUs to secure their futures and help revitalize the communities they serve. Partnerships between HBCUs and CDFIs are an important strategy for reducing the racial wealth gap and fostering sustainable economic growth. By leveraging flexible, mission-driven capital, these partnerships can unlock new opportunities for HBCUs to thrive as community anchors.